This blog distills a few key lessons that two of the coaches from FITSAcademy learnt from their very first multifamily deal. Mike & Keith spent close to 2 years to find their first property in a tertiary market in South Carolina. Short of capital then, they took on limited partners (close friends) who shared similar interests in real estate and “syndicated” their first transaction and off they went. Fast forward a few years later and after more than a dozen full-cycle deals – one of which is a blind-pool fund that in and of itself embodies a whole different level of complexities that many of the PE firms niched in sub-middle market CRE space could not pull off – these tried and true lessons from Mike and Keith are just as valid and applicable for new and experienced investors alike.
1st DEAL FINANCIAL HIGHLIGHTS
|● Purchase Price: $450,000||● Avg Cash-On-Cash: 8%|
|● Debt: $342,000||● ROI: 90%|
|● Equity: $108,000
● Orig LTV: ~75%
|● Equity Multiple: 1.9x
● Hold Period: 13 months
|LESSONS||DOs ✅||DON”Ts ❌|
|Do you homework to account for ALL expenses + foreseeable increases (e.g.tax assesement)||Other than property address, scrutinize everything else, no exception!|
|Know your minimum criteria when it comes to returns & cashflow, etc.||Huh? Come again? (Exactly…)|
|Sound and one that befits the property; and if needed, PIVOT||Put lipstick on a pig.
You still got a pig. Oink Oink!
|Debt||Wherever permissible, get one that offers the most flexible terms & one that matches the Business Plan & Hold Term||If short-term hold is ever a possibility, avoid prepay penalty or one that ties up most cashflow|
|Property Management||Hire a competent PM.
It’s worth it !!!
|DIY. Unless it’s your calling to deal with “TTT” – Tenants, Toilettes & Troubles|
|On picking your Partners/
|High IQ + High EQ + Shared drive, Focus + Committed + Hardworking =
GP material.You are asset managers & stewards of investors’ funds
|Avoid those who ask or think:
“You mean I gotta do work” or
Structure in Syndication
|Build in mechanism in deal to pay yourself (as GPs).
Dual City’s philosophy is ALWAYS
|Work for free. It’s a business after all.|
Fast forward a few years later and more than a decade since the bottom of the credit and the financial markets, headwinds to investing in real estate today are plentiful as uncertainty abounds: competition to buy assets is high, prices are high, interest rates are low, so prospective returns are low (or at least lower than years past). Taken together and adding unstable global trade environment and political concerns, these warrant a defensive posture.
Does that mean that you should wait out the real estate cycle by sitting on the sideline? No! We here at FITsAcademy believe investors can continue to make attractive real estate investment throughout the cycle. Doing so requires a thoughtful and disciplined approach, selectivity aided by creativity in deal structuring to navigate uncertain times and succeed no matter where the market winds blow.
Value of our coaching – help you negotiate the risk of losing money vs. risk of missing opportunity.
If you have been attempting to make that leap to your first commercial real estate/ apartment investing, you would want to have experienced coaches to look over your shoulders, help guide you through the deal process not just with book knowledge but with years of deal making experience and lessons gleaned from the trenches. One can never overstate the importance of spotting troubles before they rare their heads and protecting the downside. Yet we wrote about not getting caught up by analysis paralysis so you will be kept accountable and receive the nudge you need to take actions.
There’s no substitute for your being teachable and coachable – your willingness, ready and able do the hard work, either by sourcing deals or raising capital. Let’s face it, those want to succeed badly will make it work while those who don’t will make excuses. Which one are you? If you are ready to take the challenge and make the commitment, contact us or fill out the “Work with us” form to see if we are a good fit.